Chairman Lee Eog-weon of the Financial Services Commission traveled to India and Vietnam to strengthen financial cooperation with the two countries on the sidelines of President Lee Jae Myung’s state visits from April 19 to 25. During his trips, Chairman Lee had high-level bilateral meetings with government officials to promote the overseas expansion of Korean financial companies and facilitate their business operations in local markets, attended financial cooperation forums for the development of financial hubs and the integration of cross-border QR payments system, and held meetings with Korean financial companies and enterprises doing business in the two countries. Chairman Lee’s visit to the two rapidly growing countries underscores the Korean government’s aim to bolster strategic cooperation with the two major partners in the region particularly in the areas of financial services.
FSC Chairman’s Visit to India
India is emerging as a key economic partner of Korea with a population of over 1.4 billion, the fourth largest economy in the world, and an annual economic growth rate of about seven percent. However, financial cooperation between Korea and India has remained at an early stage. Thus, on the occasion of President Lee Jae Myung’s state visit, the FSC has sought to lay foundations to strengthen bilateral financial cooperation with India.
Meeting with India’s Minister of Finance
FSC Chairman Lee met with India’s Minister of Finance Nirmala Sitharaman on April 20 and had discussions on ways to bolster financial cooperation between the two countries. At the meeting, the two sides exchanged views on knowledge sharing and ways to enhance cooperation in the areas of fintech and the cross-border QR code payments system. The two leaders also had an in-depth discussion on ways to expand bilateral investments and strengthen cooperation in startups making use of India’s National Investment and Infrastructure Fund (NIIF). The financial leaders of the two countries agreed to continue to closely communicate to ensure the maintenance of strong financial cooperation achieved by President Lee’s state visit to India.
MOU signed on the development of financial hubs
The FSC and the Financial Supervisory Service (FSS) of Korea and the International Financial Services Centres Authority (IFSC) of India signed a memorandum of understanding (MOU) to promote cooperation between the two countries for the development of financial hubs in both countries (Seoul and Busan in Korea and Gujarat International Finance Tec-City or “GIFT” City in India). More specifically, the two sides agreed to facilitate the sharing of knowledge and experience to promote the development of financial hubs in the two countries.
Korea-India Financial Cooperation Forum
Chairman Lee attended the first ever Korea-India Financial Cooperation Forum held in New Delhi on April 20. At the forum, Chairman Lee delivered congratulatory remarks in which he emphasized the importance of bilateral financial cooperation by saying that finance will provide an engine for India’s new leap forward as it has provided a mainstay for Korea’s rapid growth in the past. The forum was held under the theme of “Advancing Financial Infrastructure and Market Connectivity for Future Growth,” and it was organized into three sessions—(a) modernizing cross-border payment infrastructure, (b) building efficient and trusted capital market infrastructure, and (c) advancing financial hubs: policy initiatives and market perspectives.
The forum was attended by some ninety officials from the financial regulatory agencies and related financial institutions of the two countries including Secretary Anuradha Thakur of the Department of Economic Affairs and Chairperson Shri K. Rajaraman of the International Financial Services Centres Authority (IFSCA).
Financial authorities from both countries took part in the forum as session speakers, providing explanations on each country’s financial hub policy and capital market infrastructure development.
MOU signed on the integration of cross-border QR payments system
The Korea Financial Telecommunications and Clearings Institute (KFTC) and the National Payments Corporation of India (NPCI) signed an MOU to facilitate the integration of the cross-border QR code payments system between the two countries. The MOU established a foundation to directly connect Korea’s QR payments system with India’s Unified Payments Interface (UPI).
Once the integration process is completed within this year, Korean visitors to India and Indian visitors to Korea will be able to make payments in the visiting country through a mobile app of their choosing without the need for currency exchange. This will also help the visitors save transactions costs by providing users with lower transaction fees (about 2%p lower compared to overseas credit card transactions fees). Thus, the integration of the cross-border QR code payments system between the two countries will help to boost convenience and cut cost for the people of both countries.
FSC Chairman’s Visit to Vietnam
Vietnam is a significant economic partner to Korea as it hosts the largest size of foreign investment from Korea and attracts the second largest group of foreign tourists from Korea, with the volume of bilateral trades also standing at a significant level. Vietnam also hosts the second largest number of Korean financial companies in overseas markets.
Against this backdrop, FSC Chairman Lee’s visit to Vietnam was organized on the sidelines of President Lee Jae Myung’s state visit to bolster the operating conditions of Korean financial companies doing business there and help to expand more opportunities to promote the overseas expansion of Korean financial services.
Meeting with Governor of the State Bank of Vietnam
Chairman Lee met with Governor Pham Duc An of the State Bank of Vietnam on April 24 and held discussions on ways to strengthen bilateral financial cooperation and boost support for Korean financial companies’ business operations in Vietnam. At the beginning of the meeting, Chairman Lee expressed appreciations for Vietnam’ central bank granting licenses to the Korea Development Bank (KDB)’s Hanoi branch and the Industrial Bank of Korea (IBK)’s establishment of a local subsidiary in Vietnam.
In this regard, Chairman Lee also asked for continuous cooperation from the Vietnamese central bank for the licensing of NH Bank and Nice Information Service in Vietnam. Chairman Lee said that NH Bank’s know-hows in agricultural financing and Nice Information Service’s credit rating infrastructure will certainly make tangible contributions to the development of Vietnam’s financial industry.
The two sides also agreed to speed up cooperation in the areas of digital finance. To boost the convenience of cross-border payments for some 4.8 million individuals traveling between the two countries every year, Korea and Vietnam agreed to finish up the process of integrating the cross-border QR code payments system between the two countries. Additionally, the two leaders discussed the sharing of Korea’s know-hows and experience in the management of nonperforming loans (NPLs) to help facilitate a further growth of Vietnam’s financial markets.
Korea-Vietnam Financial Cooperation Forum
Chairman Lee attended the Korea-Vietnam Financial Cooperation Forum held in Hanoi on April 23. The forum was held under the theme of “Financial Infrastructure as the Pillar of Growth,” and it was joined by some 150 officials from the financial regulatory agencies and related financial institutions from both countries including Deputy Minister of Finance Nguyen Duc Chi and Deputy Governor of the State Bank of Vietnam Nguyen Ngoc Canh.
At the forum, FSC Chairman Lee delivered welcoming remarks where he praised Vietnam’s confirmed upgrade to a secondary emerging market status from FTSE Russell based on the collaborative efforts with the Korea Exchange (KRX) to modernize its stock exchange infrastructure. In this regard, Chairman Lee also vowed to continue to support other financial infrastructure cooperation projects between Korea and Vietnam in the areas of insurance database and NPL trading platform.
IBK obtains license to establish local subsidiary
The Industrial Bank of Korea (IBK) has obtained a license from the State Bank of Vietnam to establish a subsidiary in Vietnam. It has been nine years since the IBK first applied for a license in 2017.
Previously in January this year, the Korea Development Bank (KDB) obtained a license to open a branch in Hanoi after about seven years of the screening process. As a result, Korean financial companies have the largest presence in Vietnam in terms of the number of local subsidiaries and the second largest in foreign bank branches.
The IBK is expected to open its Vietnam subsidiary office in October this year, and it plans to expand the supply of finance to both Korean and Vietnamese SMEs in the local market.
Integrating QR payments system between Korea and Vietnam
The Korea Financial Telecommunications and Clearings Institute (KFTC) and the National Payment Corporation of Vietnam (NAPAS) concluded an agreement on cross-border QR payments integration, building upon an MOU signed last year. This will help to facilitate the cross-border payments activities of banks and payments service providers.
There are about 4.8 million visitors traveling between Korea and Vietnam annually. An integrated QR payments system will help to save them in overseas payment transactions fees (about 2%p lower compared to overseas credit card transactions fees).
Korea already has an integrated QR payments service with Indonesia made available from April 1 this year, and will continue to work to expand partnerships with other countries, such as Singapore and Thailand.
Meeting with Korean financial companies and SMEs operating in Vietnam
Chairman Lee also took time to have meetings with officials from Korean financial companies and SMEs doing business in Vietnam to talk about the challenges and difficulties of local business environment and ways to alleviate their situations. At these meetings, Chairman Lee discussed the need to make transitions toward productive finance and vowed to seek ways to strengthen support.
MOU signed on NPL trading platform
The Korea Asset Management Corporation (KAMCO) and the Vietnam Asset Management Company (VAMC) signed an annex agreement to the previously signed MOU (2019) establishing specific areas of cooperation for the establishment of an NPL trading platform in Vietnam.
Once established, the NPL trading platform in Vietnam is expected to help Korean financial companies operating there to more effectively and promptly dispose NPLs to boost the soundness of asset management and ensure stability in business operations.
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